Formation and Registration Requirements

One of the biggest attractions of a sole proprietorship is how easily it comes into being. There is no separate law that governs the formation of a sole proprietorship, and generally no compulsory registration is required for the business to exist — a person can simply begin trading under his own name or a chosen business name. This is what makes it the least formal and least expensive form of organisation to start.

However, 'no compulsory registration to exist' does not mean 'no legal requirements at all'. Depending on the nature and scale of the particular business, the proprietor may still have to obtain certain trade-specific licences and registrations required by law before or while carrying it on:

• GST registration — a business whose turnover crosses the prescribed threshold limit under the Goods and Services Tax law must register for GST and comply with its return-filing requirements.
• Shops and Establishments registration — most shops and commercial establishments must be registered with the local authority under the State's Shops and Establishments Act (in Tamil Nadu, the Tamil Nadu Shops and Establishments Act), which regulates working hours, holidays and conditions of employment.
• FSSAI licence — a business dealing in food (a restaurant, bakery, food-processing or food-selling unit) must obtain a licence/registration from the Food Safety and Standards Authority of India.
• Other trade-specific licences — depending on the activity, a proprietor may also need a municipal trade licence, a drug licence (for a chemist), a professional-practice registration, and so on. …